Gold: 4 Ways to Maximize Profits as Yellow Metal Sets Sights on New All-Time Highs

Gold surged to $2,100 in December, surpassing highs set during the pandemic, and closed 2023 with a remarkable +13% gain, marking its best performance since 2020.

As of now, the yellow metal appears to be taking a brief pause to gather momentum before aiming for new highs in 2024.

Factors in favor of gold include:

• The Federal Reserve is expected to lower interest rates this year, likely after May, as suggested by Cleveland Fed President Loretta Mester, who anticipates three quarter-point rate cuts in the fiscal year.
• Central Bank gold demand reached near-record levels, with annual net purchases of 1,037 mt coming close to the 2022 record, falling just 45 mt short.
• Chinese household demand is expected to increase, having risen by 24% to a record $56 billion in 2023. The Year of the Dragon, beginning February 10 with celebrations lasting up to 16 days is likely to set a new record for demand. Gold is considered a symbol of good luck and is often purchased as a holiday gift during this period.
• Geopolitical conflicts, such as the Israel-Hamas conflict and the potential involvement of Iran, along with the escalating war between Russia and Ukraine.

Historically, gold prices tend to perform best between November and the end of February, with three of the four best monthly results typically occurring during this period, while March is often the least favorable month.

In the chart above, we can see how the yellow metal has failed to break higher every time it comes across a key resistance.

Below, you can see its uptrend with more longer-term perspective.

What Is the Best Way to Invest in Gold?

There are several ways to invest in gold. Listed below are the most popular ways investors tend to gain exposure to the yellow metal:

1. Physically purchasing bullion incurs economic costs and lacks liquidity, while also presenting risks like theft.
2. Buying shares involves investing in mining companies, requiring operating costs along with time-consuming efforts for tracking and analysis.
3. Utilizing derivatives, such as futures and CFDs, is suitable for short-term trades and capitalizing on market downturns. However, the potential for heavy losses is very high due to leverage.
4. Specialized vehicles like mutual funds and ETFs offer an alternative. Among these, ETFs are particularly attractive due to minimal economic costs, requiring no significant time or effort. Investing in a gold ETF ensures participation in a product mirroring the performance of gold.

In the case of ETFs, they stand out as the optimal choice, featuring low economic costs, minimal time and effort requirements, and a guarantee to replicate gold's price moves.

A gold exchange-traded fund (ETF) represents a fund comprising a single asset: gold. This ETF trades on a stock exchange like any other stock, deriving its value from holding underlying assets focused on the precious metal.

Which Gold ETFs Are the Best?

• SPDR Gold Shares (NYSE:GLD):

This is the largest gold ETF with over 57 billion under management. It was launched in November 2004 and has a fee of 0.40%. Its return over the last 5 years is 9.60%.

• iShares Gold Trust Micro (NYSE:IAUM)

This ETF has delivered a 12% performance over the past year. The expense ratio stands at 0.09%, and the fund does not provide an annual dividend yield. IAUM has accumulated $1.2 billion in assets under management since its inception on June 15, 2021.

• SPDR Gold MiniShares (NYSE:GLDM)

This ETF has delivered a one-year performance of 12%, with an expense ratio of 0.10%. The ETF does not provide an annual dividend yield. Currently, GLDM manages assets worth $6.1 billion, and it was launched on June 15, 2018, by the World Gold Council.

• Goldman Sachs (NYSE:GS) Physical Gold ETF (NYSE:AAAU)

This ETF has delivered a 12% performance over the past year. It boasts an expense ratio of 0.18% and does not offer an annual dividend yield. The ETF has accumulated $607 million in assets under management since its inception on June 27, 2018. It is issued by Goldman Sachs.

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Disclaimer:The author does not own any of these shares. This content, which is prepared for purely educational purposes, cannot be considered as investment advice.